Since the large increases in litigation court fees and changes in rules regarding recoverability of success fees under conditional fee agreements, people have been looking for new ways of funding litigation; particularly large scale litigation against institutional bodies or others that may have significantly deeper pockets than they do. One avenue that has started to be explored is that of crowd funding.

Crowd funding has had its own individual successes and uses as a source of finance. For example insolvency practitioners have used crowd funding to keep businesses trading through administration like the Marussia Formula One team. Equally it has been used by a number of commercial bodies to fund various business deals or other plans. However until recently, it has never before featured in litigation.

Commercial third party funding where a party takes a slice of damages from a successful claimant has long featured as a way of funding the costs of litigation and indeed now makes an appearance on the stock exchange and through various hedge funds. That remains an option for limited commercial claims. Individual investors submitting their small or large funds to a collective pot of crowd funding is however a novelty.

One body that has set up such a scheme offers the opportunity for investors to make an investment for a return of potentially 500%, dwarfing traditional investments and bank interest rates whilst offering access to justice to the recipient of that funding.

Traditionally this has only taken root in overseas jurisdictions and indeed a question has been raised recently over the legality of the system in Ireland. The suggestion made is one which has been the traditional objection in England and Wales being that it would be champertous. That was for a long time something which was illegal on the theory that it would encourage law suits.

Funding works on an all or nothing basis and is currently driven at public interest cases. Crowd Justice the latest legal crowd funder seeks funding for public interest cases via both small and large investors seeking to make a return.

Examples of such claims include claims against aspect of environmental pollution and judicial reviews of various authority decisions.

Certainly the obvious claims to fund are ones such as judicial reviews or other claims which will affect a large body of people but are expensive to bring. As new parties come into this market and people variously become more comfortable with such alternative ways of investing their money this can only be a growing area leading to a greater number of claims against publicly owned bodies and large institutions.

Our opinion is this is a market which will develop greatly, the next stage being the funding of claims against “unpopular” defendants in society whom it will be relatively easy to raise money to claim against and, following this further broadening of the market, anything is possible.

For more information on crowdfunding or any aspect of litigation do contact us.

About the author

Daniel Jennings Partner

Daniel advises on commercial litigation and dispute resolution, specialising in commercial contract disputes, finance litigation, investment and tax litigation and partnership disputes.